Tuesday, July 26, 2011


Recently written by Northeastern University's economists, the following passage further explains the disproportionate benefit of the post-recession recovery on our largest corporations:

Between the second quarter of 2009 and the fourth quarter of 2010, real national income in the U.S. increased by $528 billion. Pre-tax corporate profits by themselves had increased by $464 billion while aggregate real wages and salaries rose by only $7 billion or only 0.1%. Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. ...The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented.

"Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule -- and both commonly succeed, and are right."

-- H.L. Mencken

While recent economic releases suggest an anemic trajectory of economic growth, an economic double-dip still seems unlikely. Nevertheless, the recovery's sluggish pace exposes it to mistaken public policy (something we are getting in spades these days).

My view continues to be that a contagion in confidence is one of the most powerful headwinds to business expansion and economic and employment growth.

At the core of this loss of confidence is the increased recognition of the ineptitude and partisanship of our politicians, which has been vividly demonstrated in the Washington, D.C., debt ceiling circus over the last several days.

But the problems run deeper than the current debate as evidenced by the absence of major deals and solutions on trade, jobs and other key issues.

Something has happened to encourage scripted talking points and to discourage compromise between our two political parties as debate has become vitriolic and acidic.

A divided and dysfunctional government more concerned with those talking points than thoughtful policy has likely already brought much damage to the aura of the U.S. -- for instance, in our credit worthiness and in the perception of a lack of seriousness regarding a decisive attack on our fiscal imbalances.

This isn't the government we are watching, it's junior high school.... We're governed by self-absorbed, reckless children.... The budget war reflects inanity, incompetence and cowardice that are sadly inexplicable.

-- Nicholas Kristoff, The New York Times

"A fool and his money are soon elected."

-- Will Rogers

Make no mistake, investors' rage and contempt against our politicians' lack of judgment (that borders on foolishness) runs deep -- and is bipartisan. It originally surfaced in the Democratic tsunami in the November 2008 elections, then in the formation of the Tea Party and ultimately morphed into a repudiation of many incumbents (Republicans and Democrats) in subsequent elections.